GLOSSARY · DEBT & HOUSING
Discretionary income (student loans)
The part of income that Income-Based Repayment uses to set a federal student loan payment: adjusted gross income minus 150% of the federal poverty guideline for the borrower's family size and state. The payment is 10% or 15% of it, depending on when the borrower first borrowed. A larger household raises the protected amount, and pre-tax retirement and health savings contributions lower adjusted gross income.
Also called: discretionary income, protected income
FORMULA
Discretionary income = AGI − 1.5 × poverty guideline for family size
COMPUTE IT WITH YOUR NUMBERS
LEARN IT PROPERLY
CHAPTER · STUDENT LOAN STRATEGIES · DEEP DIVEFederal Repayment Plans After the 2025 LawCHAPTER · STUDENT LOAN STRATEGIES · DEEP DIVEIncome-Driven Forgiveness and the Tax That Can FollowRELATED TERMS
SOURCES
- Income-Based Repayment (IBR): payment calculation and forgiveness. Federal Student Aid loan servicer information center (Edfinancial Services).